Commercial Leases: Condition Reports?

Hi All,

Just wondering whether condition reports are done when a Commercial Lease is assigned to another party, and what recourse may be available if a condition report was not done.

Backstory is a family friend has a Chinese partner that is a masseuse, who had always dreamed of having her own shop. A shop was advertised within the Chinese community which she decided to buy. She paid cash (I literally mean $100 notes) and was handed the keys and a lease to sign, which she did, and took over the shop within a couple of days. Yes, alarm bells should have been ringing, but apparently such deals are common in the Chinese community.

As things turn out, every customer that came in during the following 2 weeks were seeking services that were not what she had intended offering. It appears that the shop was known for its extras, so she closed it down immediately, and asked the Real Estate agent to release her from the lease.

She has signed a 2 year lease. No incoming condition report was done, and the agent is saying that:
1) She has to repaint the shop prior to releasing;
2) She has to pay a month's rent up front for re-leasing, plus advertising fees.

The shop is in a terrible state. Upstairs the window frames are all rotted and some have broken panes - I think the taped up glass is the only thing holding them together! All bar 1 of the upstairs windows have locks missing.

But the real kicker is the dodgy-brothers plumbing. Several rooms have had spa baths fitted, with rough holes punched through double brick walls to accommodate a 40mm PVC drain pipe and 2 x pex pipes (1 hot and 1 cold) all cable tied to external down pipes. There is one exception - a hole has been cut in the back door to run the plumbing into a spa bath. There is no way this would have a certificate of compliance!

So, should a condition report have been done between tenants? If it was not done, is there scope to invalidate the lease given the premises were non-compliant and the tenant is unable to read and write English and was pressured to sign without opportunity for counsel? There has been no transfer of business name etc, just the lease and handover of the keys.

I realise her purchase moneys are long gone. Now its just a case of minimising losses.

 

By the sounds of it, your friend has entered into a new lease, not an assignment of lease. As a masseuse, the lease would be covered under the retail leases act. If the lease has been misrepresented or is not a retail lease or some other defect (eg no disclosure statement), there may be an opportunity to break the lease without penalty (depending upon state legislation).

There are sections of the act which cover unconscionable conduct, disclosure statements, maintenance responsibility etc.

Have a look at these for more info.
Vic - Guidelines
Retail Information Brochure
Disclosure statements
Retail Leases regulations


Contact the Victorian Small Business Commission - You can speak to someone in person by calling VSBC on 13 VSBC (13 8722) or emailing us with an enquiry. (there is probably an interpreter service available as well).

She should seek legal advice ASAP to seek to terminate the lease.

IIRC, the disclosure statement should be signed by a solicitor confirming that her rights have been explained to her.

 

Much appreciated!